Moving Average Analysis of CAT

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From the Weekend Report 11/12/2010: CAT is now in phase two of the oscillation cycle around the 200 session average. The price is 22.00 % above the line, but some convergence has taken place during the week.

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Different ways of averaging are tested on CAT stock prices for their ability to predict trend movements. Techniques available include moving weighted or exponential averages of various periods and the family of MACD (Moving Average Convergence Divergence) indicators.

Unfortunately, some of the most popular indicators of this type can prove to be the worst forcasting indicators. The next page tests the effectiveness of these methods as predictors of future prices for CAT.

Red is the 200 bar SMA and Green is the 20 bar average. The Simple Moving Averages above are un-weighted. While unsophisticated, they frequently yield better results than some of the more highly tuned methods examined in following sections. Commonly, speculators will use exponential averages or weighting techniques to emphasize the most recent data. But past a certain point, such front weighting can dramatically increase false signals. A good un-ambiguous signal will be noticable through a variety of averaging methods, including some of the most simple.

Moving Average Convergence of Caterpillar

	Companies In the News
	Monday, November 15, 2010: We have news on PG&E Corporation, ticker symbol PCG. A significant moving average event has happened. Also, there are breaking events concerning Cree, Inc. and Abbott Laboratories. From the News Archive: (11/12/2010 ) A favorable event happened at PetSmart, Inc. Meanwhile, bad news came from Intel, Chesapeake Energy Corporation, and JP Morgan Chase.

MACD analysis is dangerously suited for overtuning, since it may use any of an infinite number of averaging methods and coefficients. In addition to crossover signals based on moving averages, many analysts add a trigger line which is based on some average of the first two averages. Here we depict the results of 12 and 26 session Exponential Moving Averages. The exponential coefficient used here is .18. There is nothing magic about these parameters, but these are frequently seen.

Float the cursor for a longer term chart.

Moving Average Convergence Divergence, or MACD, produces buy or sell signal that are color tinted here.

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Moving Avg. 20/200 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 37 instances
Future30SesAvgClose	2.41 % minus 0.95 % = 1.46 %	12.35 %
Future5SesAvgClose	1.09 % minus 0.19 % = 0.90 %	45.83 %
Future2SesAvgClose	0.25 % minus 0.09 % = 0.16 %	20.33 %
Sell Signals - 37 instances
Future30SesAvgClose	1.93 % minus 0.95 % = 0.98 %	8.28 %
Future5SesAvgClose	0.73 % minus 0.19 % = 0.55 %	27.75 %
Future2SesAvgClose	0.34 % minus 0.09 % = 0.25 %	31.78 %
	.
Moving Avg. 5/20 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 223 instances
Future30SesAvgClose	1.13 % minus 0.95 % = 0.18 %	1.55 %
Future5SesAvgClose	0.34 % minus 0.19 % = 0.16 %	8.07 %
Future2SesAvgClose	0.22 % minus 0.09 % = 0.13 %	16.15 %
Sell Signals - 222 instances
Future30SesAvgClose	1.18 % minus 0.95 % = 0.23 %	1.97 %
Future5SesAvgClose	0.42 % minus 0.19 % = 0.23 %	11.77 %
Future2SesAvgClose	0.14 % minus 0.09 % = 0.05 %	6.58 %
	.
Moving Avg. 5/200 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 54 instances
Future30SesAvgClose	0.80 % minus 0.95 % = -0.15 %	-1.29 %
Future5SesAvgClose	0.15 % minus 0.19 % = -0.03 %	-1.61 %
Future2SesAvgClose	-0.06 % minus 0.09 % = -0.15 %	-19.07 %
Sell Signals - 54 instances
Future30SesAvgClose	0.78 % minus 0.95 % = -0.17 %	-1.47 %
Future5SesAvgClose	-0.13 % minus 0.19 % = -0.32 %	-16.00 %
Future2SesAvgClose	-0.32 % minus 0.09 % = -0.41 %	-51.90 %
	.
MACD 12/26 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 659 instances
Future30SesAvgClose	0.52 % minus 0.95 % = -0.43 %	-3.61 %
Future5SesAvgClose	-0.01 % minus 0.19 % = -0.19 %	-9.90 %
Future2SesAvgClose	-0.02 % minus 0.09 % = -0.11 %	-14.17 %
Sell Signals - 659 instances
Future30SesAvgClose	0.62 % minus 0.95 % = -0.33 %	-2.78 %
Future5SesAvgClose	0.13 % minus 0.19 % = -0.06 %	-2.85 %
Future2SesAvgClose	0.09 % minus 0.09 % = 0.00 %	-0.13 %
	.
MACD 12/26 Signal	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 899 instances
Future30SesAvgClose	1.13 % minus 0.95 % = 0.18 %	1.52 %
Future5SesAvgClose	0.26 % minus 0.19 % = 0.07 %	3.73 %
Future2SesAvgClose	0.15 % minus 0.09 % = 0.06 %	7.23 %
Sell Signals - 899 instances
Future30SesAvgClose	0.97 % minus 0.95 % = 0.02 %	0.20 %
Future5SesAvgClose	0.19 % minus 0.19 % = 0.01 %	0.26 %
Future2SesAvgClose	0.05 % minus 0.09 % = -0.05 %	-5.80 %
	.
Calibrated M by Q Half Cycle Moving Avg.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 360 instances
Future30SesAvgClose	1.45 % minus 0.95 % = 0.50 %	4.23 %
Future5SesAvgClose	0.32 % minus 0.19 % = 0.13 %	6.83 %
Future2SesAvgClose	0.35 % minus 0.09 % = 0.25 %	32.22 %
Sell Signals - 359 instances
Future30SesAvgClose	0.97 % minus 0.95 % = 0.02 %	0.14 %
Future5SesAvgClose	-0.23 % minus 0.19 % = -0.42 %	-21.32 %
Future2SesAvgClose	-0.25 % minus 0.09 % = -0.34 %	-42.97 %
	.
Calibrated M by Q Full Cycle Moving Avg.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 251 instances
Future30SesAvgClose	0.87 % minus 0.95 % = -0.08 %	-0.68 %
Future5SesAvgClose	0.27 % minus 0.19 % = 0.09 %	4.52 %
Future2SesAvgClose	0.26 % minus 0.09 % = 0.16 %	20.87 %
Sell Signals - 251 instances
Future30SesAvgClose	0.92 % minus 0.95 % = -0.03 %	-0.25 %
Future5SesAvgClose	-0.09 % minus 0.19 % = -0.28 %	-14.07 %
Future2SesAvgClose	-0.13 % minus 0.09 % = -0.23 %	-28.70 %
	.
Projected Crossing of SMA 20/200.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 40 instances
Future30SesAvgClose	1.98 % minus 0.95 % = 1.03 %	8.73 %
Future5SesAvgClose	0.27 % minus 0.19 % = 0.08 %	4.26 %
Future2SesAvgClose	0.34 % minus 0.09 % = 0.25 %	31.73 %
Sell Signals - 45 instances
Future30SesAvgClose	2.21 % minus 0.95 % = 1.26 %	10.65 %
Future5SesAvgClose	0.34 % minus 0.19 % = 0.15 %	7.61 %
Future2SesAvgClose	0.14 % minus 0.09 % = 0.05 %	5.75 %
	.
Projected Crossing of SMA 5/20.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 269 instances
Future30SesAvgClose	0.60 % minus 0.95 % = -0.35 %	-2.97 %
Future5SesAvgClose	0.12 % minus 0.19 % = -0.07 %	-3.37 %
Future2SesAvgClose	-0.02 % minus 0.09 % = -0.11 %	-13.70 %
Sell Signals - 223 instances
Future30SesAvgClose	0.79 % minus 0.95 % = -0.16 %	-1.39 %
Future5SesAvgClose	0.03 % minus 0.19 % = -0.16 %	-8.11 %
Future2SesAvgClose	0.22 % minus 0.09 % = 0.13 %	16.34 %
	.

The best buy signal for 30 future sessions was 1.46 % from the Moving Avg. 20/200 Divergence,and the best sell signal for was -0.33 % from the MACD 12/26 Divergence.

For 5 future sessions the best buy signal was 0.90 % from the Moving Avg. 20/200 Divergence,and the best sell signal was -0.42 % from the Calibrated M by Q Half Cycle Moving Avg..

The best buy signal for 2 future sessions was 0.25 % from the Calibrated M by Q Half Cycle Moving Avg.,and the best sell signal was -0.41 % from the Moving Avg. 5/200 Divergence.

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